Board of Directors considers gas pricing for CIS and Baltic countries
The Board of Directors’ meeting is underway at the Gazprom Headquarters.
The Board of Directors approved Gazprom’s efforts related to the phased transition of natural gas prices for CIS and Baltic countries to the European gas price level reflecting consumer properties of gas.
The Company’s Management Committee was tasked to continue the improvement of gas pricing for these countries including the application of market approaches.
The Gazprom’s gas pricing policy in relation to CIS and Baltic countries when supplying Russian and Middle Asian natural gas is featured by the following main principles:
- phased transition to market gas prices, which implies consistently bringing prices to an economically justified level reflecting consumer properties of gas;
- consideration of intergovernmental agreements with gas importing countries while determining contractual terms with counteragents;
- division of contracts by business type: natural gas purchase and sale or transmission.
The implementation of pricing policy enabled Gazprom to achieve considerable results.
In 2007 the agreement base modification aimed at establishing gas prices for Baltic import companies at the market level was finished.
On December 31, 2006 Gazprom and Beltransgaz signed the Gas Supply and Transit Contract for 2007 through 2011. The contract fixed the pricing formula starting from January 1, 2008 (which is in line with the price formula for Russian gas supply to Europe) as well as the discounts to the market price for 2008–2010 (0.67, 0.8 and 0.9 respectively). Starting from 2011, Belarus as well as Russia’s industrial consumers will have gas prices equally profitable versus prices of gas delivered to Europe.
Starting from 2006, gas supply to and transit contracts via Ukraine were separated, while the contract for Russian gas supplies is concluded based on the European prices. Negotiations are underway in regard with the price for the Middle Asian gas supply between 2009 and 2011.
In December 2006 Gazprom and Moldova agreed on smooth transition to European price level by 2011 except for transmission costs. The Russian gas price for Moldova is determined based on the discounts ensuring a smooth transition to a market price level by 2011.
Also, a considerable price adjustment was carried out for the consumers of Transcaucasia.
In whole, Gazprom’s active policy in gas markets inside FSU leads to a considerable increase in earnings from gas sales and growth of tax receipts. Over the period between 2005 and 2007 a weighted average price of Russian natural gas for the CIS and Baltic countries rose by 2.3 times (for the countries of Western Europe – by 1.4 times).